News-driven international business cycles
This paper examines the international transmission effects of news about the total factor productivity (TFP) in the US on the Canadian and Japanese economies. I develop and estimate a two-country real business cycle model to generate booms in Canadian and Japanese variables in response to news about future US TFP. I find that international macroeconomic comovements can be generated by news about the future TFP in the US. Unlike previous studies, I show that the response of the Canadian or Japanese TFP to a US news shock is important for generating the boom observed in the empirical analysis. The estimated preference parameters indicate that eliminating the wealth effect on hours worked is important. I also show that a low elasticity of substitution between domestically and foreign-produced intermediate goods can also help explain the domestic boom created by a news shock.
Year of publication: |
2013
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Authors: | Sakane, Kosaka Michiru |
Published in: |
The B.E. Journal of Macroeconomics. - De Gruyter, ISSN 1935-1690. - Vol. 13.2013, 1, p. 43-43
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Publisher: |
De Gruyter |
Saved in:
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